Banking stocks lead market decline despite S&P rating upgrade and strong banking sector growth
KARACHI: The Pakistan Stock Exchange (PSX) remained under pressure during the past week, with the KSE-100 Index closing at 171,021.20 points, down 2.7% week-on-week (WoW), or 4,782 points, as persistent geopolitical uncertainty and cautious investor sentiment triggered broad-based selling.
According to the latest weekly market review, investors maintained a risk-averse stance amid heightened regional tensions, while trading activity also weakened throughout the week.
Banking sector leads market decline
The banking sector emerged as the largest drag on the benchmark index, erasing 1,369.56 points, followed by:
Fertilizer: -695.96 points
Exploration & Production (E&P): -585.32 points
Cement: -574.56 points
Investment banks: -275.18 points
On the positive side, refinery stocks added 52.49 points, while insurance, real estate, textile weaving, and paper & board sectors recorded modest gains.
Among individual stocks, United Bank Limited (UBL) was the biggest negative contributor, shaving 593.84 points off the benchmark. Other major drags included Fauji Fertilizer Company (FFC) (-512.87 points), Habib Bank Limited (HBL) (-255.47 points), Engro Holdings (ENGROH) (-246.28 points), and Pakistan Petroleum Limited (PPL) (-203.28 points).
Positive contributions came from Attock Refinery Limited (ATRL) (29.32 points), Cnergyico (CNERGY) (23.17 points), Nestlé Pakistan (21.50 points), Ghani Glass (GHNI) (6.99 points), and Adamjee Insurance Company Limited (AICL) (6.57 points).
Trading activity weakens
Market participation also declined during the week.
Average daily traded volume fell 6% WoW to 696 million shares, while average daily traded value dropped 19% WoW to $99.8 million, reflecting cautious investor participation.
Positive macroeconomic developments
Despite the market’s weak performance, several macroeconomic indicators remained encouraging.
S&P Global Ratings upgraded Pakistan’s long-term sovereign credit rating to ‘B’ from ‘B-‘ with a Stable Outlook, citing continued implementation of IMF-backed reforms, stronger fiscal performance, improving institutions, higher foreign exchange reserves, and ongoing fiscal consolidation.
The banking sector also posted robust growth during June 2026:
Deposits increased 15.2% YoY to PKR 40.9 trillion.
Advances rose 13% YoY to PKR 15.3 trillion.
Investments climbed 16.4% YoY to PKR 42.6 trillion.
Meanwhile, petroleum prices increased under the revised pricing mechanism based on the seven-day average of Platts prices. Petrol rose by PKR 15.37 per litre to PKR 331.52, while high-speed diesel increased by PKR 24.31 per litre to PKR 378.66.
The Pakistani rupee remained broadly stable, appreciating 0.03% WoW to close at PKR 277.87 against the US dollar.
Outlook
Analysts expect the KSE-100 Index to remain sensitive to geopolitical developments and the ongoing corporate earnings season.
They also anticipate the State Bank of Pakistan (SBP) to keep the policy rate unchanged at 11.5% until there is greater clarity on inflation and external sector trends.
The report noted that the KSE-100 Index is currently trading at a price-to-earnings (P/E) ratio of 7.9x, offering an attractive dividend yield of 6.4%.
Analysts’ preferred stocks include OGDC, PPL, FFC, LUCK, MLCF, NBP, HUBC, PSO, DGKC, SAZEW, and ATRL.